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The paper brings together two distinct strands of literature that discuss the process of convergence in the EU and the impact of public debt on growth. It makes a contribution to both literatures, ...

The aim of the article is to examine, for the first time to our knowledge, the relationship between the intraregional spatial inequality and the regional income level in the European Union (EU)-27 regions, in the context of the inverted-U hypothesis. Although this hypothesis might exist not only at the intranational but also at the intraregional level, the empirical consideration of the latter has been largely ignored. This is quite surprising because intraregional inequality is a very important issue in regional science literature. The results of the article establish a strong empirical relationship that contradicts the conventional wisdom. In other words, the results imply a U-shaped rather than an inverted U-shaped curve, raising doubts about the adequacy and interpretative power of this hypothesis. Moreover, the acknowledgment of the importance of intraregional inequality in the EU, the empirical evidence of spatial effects in intraregional spatial inequality, and the possibility of a trade-off between the regional income level and intraregional inequalities constitute other important contributions of this article, deriving major economic and political implications. The evidence presented in this article can be used as a building block for future theoretical and empirical work.

Two types of econometric models have typically been used in geographical research: global and local. The former produces parameter estimates that represent an average type of economic behavior; that is, for each variable there is one regression coefficient for the entire sample. The latter suggests that the relationship of interest can vary widely over space allowing the regression parameters to change across spatial entities. Commonly, the regression results obtained from these two different approaches are compared to each other to determine which model performed better. The aim of this paper is twofold. First and foremost, it is to show that a comparison between global and local models is problematic and misleading since it overlooks a critical group of regression models known as regime models. This means that this type of comparison should be extended by including all different regression approaches (i.e. global, local and regime). Sometimes, regime models can perform as well as, or even better, than (more complex) local models and this is something that should be taken into account by empirical geographical studies. Secondly, the paper investigates the convergence process in the regions of the (enlarged) European Union (EU) over the period 1995–2005. The results of this paper show that a regime (convergence) model seems to perform better than any other model employed, implying a very low convergence rate among European regions and highlighting the heterogeneous spatial impact of the EU economic integration process.

A plethora of past studies have concluded that unconditional β-convergence is present in a broad sample of regions, implying that poor regions grow faster than rich ones. All these econometric studies tend to overlook the relative importance or size of each region in the national setting, treating all regional observations as equal. However, this assumption might lead to unrealistic or misleading results. Convergence analysis could be more meaningful if it included a weighting mechanism taking into account the size of regions. The aim of this paper is to investigate whether the inclusion of a weighting mechanism in β-convergence analysis, giving more weight to larger regions and less to smaller ones, can result in sharply different implications for the regional convergence-divergence process. For this reason, both unweighted ordinary least squares (OLS) and weighted least squares estimators are used in the analysis of regional (intra-national) convergence within 10 European Union (EU) countries over the period 1990–2000. The comparison between the two methods reveals that when regions are appropriately weighted for their size, intra-national divergence, rather than convergence found with the OLS approach, seems to be the dominant experience in the EU.